Business and management

The new drug war continued

Leaky pharma

THIS month The Economist described a looming war over drug prices. Since then, that fight has erupted in South Africa. The government is considering broad changes to its patent laws. The world's biggest drug companies are in a panic, according to documents leaked this month, and may launch a broad campaign to fight the reforms. This has infuriated South African officials. "I am not using strong words, I am using appropriate words: this is genocide," thundered Aaron Motsoaledi, South Africa's health minister (pictured), to the Mail & Guardian.

More than a decade ago, South Africa fought multinational drug companies over HIV medicines. The case, often dubbed “Big Pharma v Nelson Mandela”, was a low point for the drugs industry. But South Africa's new brawl is part of a different, larger battle over medicines. Governments in the developing world want to expand access to health care, including innovative drugs. As the death toll from infectious disease drops, chronic ailments are more common, boosting demand for drugs for cancer and diabetes. Yet governments are balking at the cost. Firms counter that high prices support the invention of new treatments.

The South African fight concerns proposed reforms to intellectual property rules, published back in September. The plan, if passed, would make it harder for companies to win drug patents. Other measures include expanding the import of cheap drugs from other markets. This makes drug companies anxious. The Innovative Pharmaceutical Association of South Africa (IPASA), the country's drug lobby, published public comments on the draft policy in October.

But the current kerfuffle is about documents leaked in mid-January. An e-mail from an executive at Merck, addressed to executives at other big pharmaceutical firms, outlines plans for a campaign to scuttle the patent reforms. The e-mail explains that IPASA, working with PhRMA, America's drugs association, had selected an American lobbying firm to lead the campaign, Public Affairs Engagement (PAE). According to a proposal, it planned to argue that the patent reforms would reduce investment in South Africa. The campaign would insist that South African patients suffer not from high drug prices, but "poor health infrastructure, improper management, and, ultimately, poverty." Fighting the reform is crucial, PAE explained, because South Africa's policy may "provide the model for other developing nations, inside and outside Africa, including such important aspiring economies such as India and Brazil."

The plans for the campaign are not particularly surprising. Companies are keen to earn more revenue in emerging markets. IMS Health, a research outfit, predicts that spending on drugs in North America, Europe and Japan will grow by no more than 1-4% annually until 2017. Spending in emerging markets is due to jump by 10-13% a year.

But companies will wrestle with governments, as the leak proves. Médecins Sans Frontières (MSF), a group that treats poor patients and advocates on their behalf, is livid: “Thanks to leaked documents, we know that South Africa represents ‘ground zero’ for the looming legal battles on intellectual property between pharmaceutical companies and middle-income countries seeking access to affordable medicines for their people,” said MSF's Manica Balasegaram in a press release on January 21st. "Nearly 16 years after Merck and 41 other applicants sued Nelson Mandela and the South Africa government to block implementation of amendments to its Medicines Law, Merck has emerged as a key figure in an industry effort to block new reforms," said James Love of Knowledge Ecology International.

Dr Motsoaledi went one step further, telling the Mail & Guardian, "this document can sentence many South Africans to death." On January 23rd Malebona Precious Matsoso, the director-general of South Africa's health department, decried the campaign before the World Health Organisation's executive board: "We cannot be side-tracked or derailed in our course of action of defending public health and the right to life." Despite the leaked documents, Val Beaumont, IPASA's chief operating officer, says that IPASA has rejected PAE's proposal. That certainly won't be the end of the fight. The government may vote on the new policy within the next six months.

Readers' comments

Pharma takes huge profits from drug discovery that was based on publicly funded research, ideas gleaned from talking with healthcare professionals and basic science researchers (BYU vs Pfizer). Pharma also gets generous tax credits for their R&D which is a form of public subsidies. Yet, they price their drugs out of reach of many patients, not just in poor countries but also the US. The patent system currently dissuades innovation. Instead of focusing on new drugs, companies find it easier to expand the current product with slight tweaks from regular release to sustained release to extended release. Costing the public billions of dollars and not focusing on new drug discovery. Also the power in Pharma has shifted from the scientist/healthcare professionals to businessmen and wall-street. Capital and business acumen is needed to run a company but it’s the scientist, researcher and healthcare professional (physicians and pharmacist) who used to have a bigger role and who do the real work.

New drugs/research not very profitable but advancements for man-kind get chopped and buried because they are not billion dollar ideas. Big Pharma has hindered innovation in its pursuit of huge profits by cuts RD or mergers which has a chilling effect on researcher who feel uncertain about their job security (productivity loss) and now Pharma just buys promising new drugs/ideas and discards the rest of the company.

Furthermore to combat shrinking pipelines they are charging more for the same drugs and even going after hospitals (enrolled in discount purchasing programs for the poor)who treat the poor with audits intended to claw back and penalize for what amounts to sloppy paperwork. The later was triggered by some private oncology groups buying at the discount pricing but charging full price. Now poor hospital who run in the red are paying millions per year for software and staff to validate each product purchased under the discount program for each patient.